CORPORATE CATALYST

INDIA PVT LTD

(in joint venture with SCS Global)

IFRS >>
India

www.cci.in
CORPORATE CATALYST
INDIA PVT LTD

1. Why IFRS

International Financial Reporting Standards (IFRS) convergence, in recent

years, has gained momentum all over the world. As the capital markets
become increasingly global in nature, more and more investors see the need
for a common set of accounting standards.

India being one of the key global players, migration to IFRS will enable Indian
entities to have access to international capital markets without having to go
through the cumbersome conversion and filing process. It will lower the cost
of raising funds, reduce accountants' fees and enable faster access to all
major capital markets. Furthermore, it will facilitate companies to set targets
and milestones based on a global business environment, rather than an
inward perspective.

Furthermore, convergence to IFRS, by various group entities, will enable

management to bring all components of the group into a single financial
reporting platform. This will eliminate the need for multiple reports and
significant adjustment for preparing consolidated financial statements or
filing financial statements in different stock exchanges.

2. How the world is converging into IFRS

IFRS is used in many parts of the world, including the European Union, Hong
Kong, Australia, Malaysia, Pakistan, GCC countries, Russia, South Africa,
Singapore and Turkey. As in August, 2008, more than 110 countries around
the world, including all of Europe, currently require or permit IFRS reporting.
Approximately 85 of those countries require IFRS reporting for all domestic
listed companies.

Timeline for Convergence (major countries)

Europe,UK Canada India US Japan

(2005) (2011) (2011) (2014) (2016)

3. India and IFRS

In India, there will be two set of Accounting Standards –

1. The existing Indian Accounting Standards (IAS) – will be applicable to all

companies which are not required to adopt IFRS converged standards.
2. Indian Accounting Standards, as converged with IFRS (Ind-AS) – will be
applicable to companies operating in India in phased manner beginning
from April 1, 2011. In the first phase companies forming part of stock
exchange index and those with net worth of above approx 250 million
USD will be required to present their financial statements as per Ind-AS.

There are conceptual differences between IAS and IFRS. Keeping in view the
extent of gap between IAS, Ind-AS and the corresponding IFRSs – conversion
process would need careful handling. By introducing a new company law,
the Indian Government has initiated the process to amend the legal and
regulatory framework.
The conversion would involve, Impact Assessment, Revisiting Accounting
Policies and thereafter changing the Accounting & Operational Systems
(including ERP) in order to be fully compliant with Ind AS or IFRS.
 CORPORATE CATALYST
INDIA PVT LTD
4. IFRS vs IAS
Basis IFRS
Principle vs Rule Principle based. Economic substance
based standards of the transaction is the prime
evaluation factor.
Standards vs Accounting standards take
Local laws precedence over local laws.
Presentation of Primarily, no prescribed format.
financial statements Assets and liabilities need to be
divided into current and non-current.
Depreciation on Depreciation is an annual charge on
fixed assets basis of estimated life of assets.
Cash flow Mandatory. Any of the direct
statements or indirect method can be used.
Change in accounting Comparatives are restated unless
policy and estimates specifically exempted, where the
effect of period(s) not presented
is adjusted against opening retained
earnings.
Valuations Provides specific guidance and
standards to deal with mergers,
acquisitions, take over, amalgamations
etc specifically as regards to valuation
related issues.
Adoption IFRS 1 spells out the methodology
methodology` and systems to be adopted for first
time adoption of IFRS.
IFRS specifies the financial reporting
in hyper inflationary economies. Also
has a specific standard for retirement
benefit plans, agriculture, insurance
contracts and disclosure of financial
instruments.
IAS
Generally rule based. Companies act
and rules dominate and guide as to
how a transaction is recorded.
Local regulations usually take
precedence while preparing financial
statements. Whenever there is a
conflict between law and standard, the
law prevails.
Companies Act and other industry
regulations have defined prescribed
formats.
Minimum depreciation rates have
been prescribed in Schedule XIV of
the Indian Company's Act.
Mandatory for some. Direct method
for insurance companies and indirect
method for other listed companies.
The effect of change is included in
current year income statement. The
impact of the change is disclosed.
Positions taken under IAS are
debatable.
More traditional and insulated from
changing economic scenario. A more
historical perspective.
 CORPORATE CATALYST
INDIA PVT LTD

5. Corporate Impacted by IFRS in India

In the first phase, the following entities need to adopt IFRS with effect from
April 1, 2011
- Public Listed Companies forming part of Stock Exchange Index
- All companies with a net worth of over INR 1000 Crore (USD 250 million
approx).
Additionally, Indian subsidiary of foreign companies will need to convert their
financial statements as per IFRS, if so required by the parent company for
consolidation purpose.

6. Some Key Challenges to Implementation

a) Amendments in the Law
IFRS will have a bearing on the legal provisions as are presently
set out in the Indian Income Tax Act, Companies Act, etc.
b) Impact on financial results
Financial reports will experience a lot of changes. For example
treatment of depreciation differs. Hence, the value of assets as well
the profitability of the organization may swing, which, in turn, may
impact the net worth.
c) User awareness and training
Many people are yet not aware of IFRS, their complexities and impact. A
change in the repor ting format will require awareness of
these new norms and systems, training and education, both for the
professional as well the user.

7. ASA - Your Partner in Change

ASA has established a center of excellence for IFRS. The team includes
chartered accountants certified in IFRS. We are fully geared to provide the
following services
a) Training (3-5 days): We have both general and industry specific
training modules on IFRS. Our certified trainers would help your
users to understand the IFRS and its key differences with IAS.
b) Impact Analysis (3-6 weeks): Our detailed checklist helps to
determine the impact of conversion on different stakeholders of the
company viz. promoters, investors, shareholders, regulators, etc.
c) Conversion (3-4 months): We would take the company through
the process of conversion including changes to accounting/operational
systems). We follow template based approach in order to fast track the
process of conversion, besides coordinating the conversion activities
with the concerned IT vendor.
d) Accounting Support: The conversion process would lead to
additional work in relation to accounting or reconciliation. We could
provide appropriate staff to close the gap.
ASA has contributed in many seminars and conferences, and has arranged
client specific workshops as regards the various aspects of IFRS conversion.
Being a member of NIS Global, an international association of independent
accounting firms, we are able to bring to bear experience of other member
firms in Europe, Japan etc which assisted their clients to undergo the process of
IFRS conversion.
 CORPORATE CATALYST
INDIA PVT LTD

Conversion Roadmap

Preliminary Study Initial Conversion Integrate Implement

Creating IFRS
Evaluate IFRS and Evaluating and
Financial Statements Proper Reconciliation
Indian GAAP Selecting IFRS
during the DUAL To ensure Correctness

Communication
Differences Accounting Policies Reporting period.

Broad Based Assessment of IFRS

Impact Update SOP's

Information
Custom Code Interfaces, Extensions

Management
Knowledge
Requirement
Platform For Regular
Planning
Updates From IASB

Solution Design, Systems Integration

Stakeholders Representation
Process Analysis Build & test Testing

Cutover Planning
Develop Change
Strategy

Infrastructure
Security & Controls Management

Manage the change

Team Training Development

Management

User Procedures & Training

Program Management

Change Management

Information Technology firm

ASA
Head Office : New Delhi
Tel : +91 11 4100 9999
Fax : +91 11 4100 9990
Bengaluru
Tel : +91 80 4151 0751
Fax : +91 80 4113 5109
Chennai
Tel : +91 44 2431 2201
Fax : +91 44 2433 4613
Gurgaon
Tel : +91 124 4949 350
Fax : +91 124 4949 351
Hyderabad
Tel : +91 40 2776 0423
Kochi
Tel : +91 48 4232 1015
Mumbai
Tel : +91 22 2410 4000
Fax : +91 22 2410 6263
Singapore
Tel : +65 6223 3708
Fax : +65 6223 4208
Tokyo
Tel : +81 3 6427 0780
Fax : +81 3 6427 0790
Contact : info@cci.in
info@asa.in

Prepared by ASA & Associates, chartered accountants, under guidance of

Corporate Catalyst India Pvt. Ltd. (A joint venture with SCS Global)

National Affiliates
Ahmedabad, Chandigarh, Kolkata, Pune

updated as on January 2011

International Affiliates

updated as on April 2011

Australia, China, Dubai, France, Germany, Hong Kong, Indonesia, Ireland, Israel,
Italy, Japan, Korea, Malaysia, Mauritius, Myanmar, Netherlands, Philippines,
Portugal, Slovenia, Spain, Switzerland, Thailand, United Kingdom, Vietnam

* This document has been prepared as a service to the clients. We recommend that you seek professional
advise prior to initiating action on specific issues.